Adds context throughout, stock movement in paragraph 7, analyst comment in paragraph 10, adds graphic

Feb 17 (Reuters) - General Mills GIS.N cut its annual core sales and profit forecasts on Tuesday, sparking a selloff across consumer goods companies battling with weak demand and resistance from shoppers to rising prices.

Lower-income shoppers are trading down to value brands and private-label goods as affordability takes a hit, denting sales at companies that have tried to protect margins by raising product prices over the last few years.

"Cost of living and housing pressures are reshaping spending patterns, and value is a core expectation that is here to stay," CEO Jeffrey Harmening said at the Consumer Analyst Group of New York conference.

Shares of the Cheerios cereal maker, which had in December left its annual outlook unchanged, slumped 7%. They have fallen nearly 19% in the last 12 months.

The packaged food industry is also evolving to cope with a change in dietary preferences toward healthier foods, accelerated by fast adoption of GLP-1 weight‑loss drugs.

Executives at General Mills said its cereal business, the second biggest revenue generator, is facing tough competition from protein-based breakfast products.

The comments knocked packaged-goods stocks lower: Campbell's CPB.O slid 7.5%, Kraft Heinz and McCormick MKC.N each fell 4%, while J.M. Smucker SJM.N shed 3.5%.

General Mills said it is ramping up innovation on protein‑centric products, with new items set to make up roughly 25% of fiscal 2026 net sales.

Earlier this month, PepsiCo PEP.O cut prices on core brands such as Lay's and Doritos by up to 15% in response to a consumer backlash against earlier price hikes, while Kraft Heinz KHC.O paused its splitting plans and forecast weak annual profit after missing quarterly estimates on tepid demand.

"Despite early progress on General Mills' strategy to reinvigorate organic growth, the consumer environment continues to worsen, resulting in faltering category volumes and a higher share of purchases made on promotion," Morningstar analyst Kristoffer Inton wrote in a note.

General Mills expects annual sales to be down 1.5% to 2%, compared with its prior range of down 1% to an increase of 1%.

It also forecast annual adjusted operating profit and adjusted earnings per share to drop 16% to 20% in constant currency, compared with its previous range of down 10% to 15%.

(Reporting by Koyena Das and Savyata Mishra in Bengaluru; Editing by Tasim Zahid and Arun Koyyur)

((koyena.das@thomsonreuters.com))